LIVE MARKETS-Selloff in consumer staples presents buying opportunity - SentimenTrader's Goepfert

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SELLOFF IN CONSUMER STAPLES PRESENTS BUYING OPPORTUNITY - SENTIMENTRADER'S GOEPFERT

A recent selloff in some defensive sectors, particularly consumer staples, presents a buying opportunity to investors, according to SentimenTrader's Jason Goepfert.

The S&P 500 consumer staples index .SPLRCS has dropped around 7% since the start of December, driven partly by losses in companies such as Constellation Brands STZ.N, Brown-Forman BFb.N, Hershey HSY.N, and General Mills GIS.N.

That drop compares with a 2% decline in the benchmark S&P 500 index .SPX, a 3% decrease in the blue chip Dow Industrial Average index .DJI, and the Nasdaq .IXIC, which was off 0.2% over the same period.

"These losses are disturbing for investors who might have gravitated to defensive sectors, assuming they'd hold up better if stocks were heading into a correction," Goepfert says.

However, historical data shows that when consumer staples stocks fall below volatility bands - as measured by the drop in their lower Bollinger Bands - the consumer staples ETF .XLP shows an above average tendency to rally within the next 3 to 12 months, according to Goepfert.

"When so many of these defensive stocks hit oversold readings concurrently, XLP rebounded over the next two months 94% of the time," Goepfert says.

(Chibuike Oguh)

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